Are Real-Time Performance Reviews Something to Cheer or Fear?

April 25, 2017

Imagine, for a moment, if Instagram included, instead of a simple Like option, an option to give each post a numerical rating on a scale of 1 to 10, where 10 means “I love love love it! This is an awesome post. More like this, please!” and 1 means “Are you %$^ing kidding me? Please never post something like this ever again. It is a Complete. Waste. Of time.”

As you begin to imagine this alternate Instagram universe, also imagine that each Instagram feed has an overall rating attached to it based on the average ratings of its posts (so, feeds are rated 8.76, 7.45, 6.28, etc.). In addition, imagine that if a feed drops below, say, an overall rating of 5.5, then that feed will be deleted. Forever. Finally, imagine that each year, five percent of all feeds—those with the highest overall ratings—receive a check for $100,000.

Okay, now stop imagining. And answer this question: Is that a universe you would like to live (and post) in?

Be careful before you say “no” too quickly. Because if you do, you might also be saying “yes” to the so-called new and improved way that companies are evaluating the performance of their employees.

Last week, Goldman Sachs announced that it would be following JPMorgan’s lead (which itself followed the lead of numerous other firms such as Airbnb and Accenture) and replacing its annual review system with an ongoing real-time performance evaluation system.

Goldman’s new system is based on software the firm already used in a few divisions last year. It is now being extended to the rest of Goldman’s 35,000 employees.

The idea is that after a big client pitch or product launch, employees can get quick feedback instead of waiting until year-end, Ms. Cooper [Goldman’s head of human capital management] said. A real-time sense of where they stand allows employees to make improvements and avoid feeling blindsided later on, she added.

Also according to Cooper, the change from the annual performance review to real-time reviewing was not only a function of trying to please millennials. Goldman’s Gen Xers wanted more frequent performance reviews as well.

It is easy to view Goldman’s latest shift as a response to millennials, with what is often described as their expectations of constant praise. And indeed, Wall Street has changed much about its work environment in recent years to satisfy a younger generation, including “protected weekends” at J.P. Morgan, one-month sabbaticals at Morgan Stanley and faster promotions at Goldman.

But Ms. Cooper said vice presidents and managing directors, a group that is typically in their 30s and 40s, were the most likely in the 2015 survey to say they wanted more-frequent reviews.

And so, with all types of firms moving to a constant-feedback-by-colleagues system, the question arises: Should we welcome the move toward the real-time review or should we be somewhat afraid of this new system?

The answer, it turns out, is not so clear.

While I certainly don’t believe that the annual review by a single manager is a very effective, helpful, or fair one, and while I certainly do believe that increasing the transparency with respect to how well (or poorly) employees are faring on the job is a good thing, I’m just not convinced that constant real-time feedback on employees' performance by their colleagues is the best way forward. Here's why.

The new type of real-time evaluation system seems like it could very easily feed employees’ addictions to “likes” (proven to be just as addictive as certain drugs). That is, I can easily envision employees’ work being tainted by the need and desire to please colleagues. I can also easily envision employees not taking certain creative risks at work in order minimize their “failures” and in order to maximize their ratings. Which, in the long run, would likely decrease productivity, not increase it.

In addition, I can envision the new type of review system ending up looking a lot like an episode of Black Mirror. I’m thinking, in particular, of “Nosedive,” the first episode of the latest season of the television series in which the world operates on a 5-point rating scale and looks like some sort of highly edited #filteredup version of a Hieronymus Bosch painting. That is, I can envision the real-time system taking a very dark turn.

Note that Goldman’s new performance system (as well as other firms' systems) can be carried everywhere (it’s accessible via smartphone), and so, could it be too long before employees are reviewing their colleagues as frequently as they’re checking their Instagram feeds? And what incentive is there for employees to give their colleagues a stellar review when there’s only so much money to go around during everyone’s favorite time of the year—bonus time?

Indeed, one of the major issues that many critics of the archaic annual review system had was the subjectivity in it: one boss giving you one rating with one number, one time a year. But doesn’t this new, all-day every day review system by numerous colleagues seem to be open to the possibility of even more subjectivity?

The following comes from a Wall Street Journalop-ed published nearly a decade ago. It was written by Samuel A. Culbert, a professor at UCLA’s Anderson School of Management and author of the book Get Rid of the Performance Review!.

What will it take for people to really understand that any critique is as much an expression of the evaluator's self-interests as it is a subordinate's attributes or imperfections? To my way of thinking, the closest one can get to "objective" feedback is making an evaluator's personal preferences, emotional biases, personal agendas and situational motives for giving feedback sufficiently explicit, so that recipients can determine what to take to heart for themselves.

I’m with Sam. Unless the new real-time performance review system (or any type of performance review system) addresses this issue of subjectivity on the part of the reviewer, then more reviews might simply lead to more room for error.

Which is not to say that doing away with the annual review and replacing it with the real-time review system isn’t a step in the right direction. It is. But it’s just a very small step; there’s still a long way to go.

In other words (I mean, in numbers), on a scale of 1 to 10, where 1 is “It is the best move of all time!” and 10 is “It is a terrible, awful, no-good, meaningless move,” I’d give it a 6.8.

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